As yields fall, some investors are flocking to rate-sensitive technology stocks

Published Tue, Mar 14 20231:06 PM EDT

A sharp decline in bonds yields is providing much needed relief for big tech stocks that were under pressure in recent weeks. Yields fell drastically Monday as the collapse of Silicon Valley Bank wreaked havoc on the broader banking sector and pushed investors into safe haven assets. The move brought the 2-year Treasury yield to its biggest 3-day decline since 1987 , while the yield on the 10-year Treasury note hit its lowest level since February. Yields rebounded Tuesday. US2Y 5D mountain Yield on U.S. Treasury note had its sharpest 3-day decline since 1987 "All the sudden, there are signs investors see safety in Tech," wrote Susquehanna co-head of derivative strategy Chris Murphy in a Monday note. Tech's suffered from extreme volatility in recent months as yields barreled toward multiyear highs, and the Federal Reserve restricted monetary policy to quell inflation. Higher rates typical means valuations are less attractive for tech stocks since future profits become less valuable. But the recent pullback in yields is making some beaten-up names more attractive. Technology giants with solid balance sheets, cash flows and earnings potential like Apple and Amazon added more than 1% during Monday's trading session. Microsoft jumped 2.1%. All three stocks traded higher Tuesday. MSFT 1D mountain Microsoft pops 3% as bond yields decline Combined with increasing disinflation expectations and backstop assurances for SVB depositors with money at the bank, EMJ Capital's Eric Jackson sees "extremely bullish tailwinds" for the sector going forward. "I think we're going to have to see what happens over these next few days, but I think there's reason to be optimistic that the economy can keep going," and benefit the sector, he told CNBC's " Closing Bell " on Monday. While unchanged on his negative view toward tech broadly, the Satori Fund founder Dan Niles remains bullish on Meta Platforms . He's maintained his long position on shares, citing its strong business and below market multiple. Still, Niles thinks the next 5% to 10% move in the market is lower, and the Fed is far from done with its hiking. Because of this he's recommending investors maintain a mix of long and short positions. META YTD mountain Meta Platforms shares this year Paul Meeks also views the rise in technology stocks as a short-lived relief rally following the selloff in the sector in recent weeks. While the potential for moderating interest rate hikes means good news for tech and aggressive growth, the broader macro picture remains unchanged and skewed to the downside, said the portfolio manager at Independent Solutions Wealth Management. "Besides this bank blow up inflation is still scary, still high, still probably more of an impetus to raise rates than to lower them," Meeks said. "So, I think this is a short term rally, definitely not a new bull. You'll get a new bull when fundamentals in the sector improve," which is unlikely to come until next earnings season. .IXIC YTD mountain Nasdaq Composite so far in 2023